<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Star Technologies
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF STAR TECHNOLOGIES]
NOTICE OF
1999 ANNUAL MEETING
AND
PROXY STATEMENT
STAR TECHNOLOGIES, INC.
1151-A Seven Locks Road
Potomac, Maryland 20854
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
The 1999 Annual Meeting of Stockholders of Star Technologies, Inc., a
Delaware corporation (the "Company"), will be held at the Best Western
Washington Gateway Hotel at 1251 West Montgomery Avenue, Rockville, Maryland,
on Monday, June 21, 1999, at 5:00 p.m., for the following purposes:
(1) To elect one Director to hold office for a term of three years; and
(2) To transact any other business that may properly come before the
meeting or any adjournments thereof.
Stockholders who wish to bring other business before the Annual Meeting must
comply with the provisions of Section 2.1 of the By-Laws of the Company.
Only stockholders of record at the close of business on April 22, 1999, are
entitled to vote at the Annual Meeting or any adjournments thereof. A complete
list of the stockholders entitled to vote at the Annual Meeting will be open
to the examination of any stockholder, for any purpose germane to the Annual
Meeting, during ordinary business hours, for a period of ten days prior to the
Annual Meeting at the Company's principal executive offices at 1151-A Seven
Locks Road, Potomac, Maryland.
By Order of the Board of Directors
Brenda A. Potosnak
Secretary
April 29, 1999
THE FORM OF PROXY IS ENCLOSED. TO ENSURE THAT YOUR SHARES WILL BE VOTED AT
THE MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING.
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
JUNE 21, 1999
The enclosed proxy is solicited on behalf of the Board of Directors of Star
Technologies, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held at the Best Western Washington
Gateway Hotel at 1251 West Montgomery Avenue, Rockville, Maryland, on Monday,
June 21, 1999 at 5:00 p.m., or any adjournments thereof (the "Annual
Meeting"). This Proxy Statement and the accompanying form of proxy will be
mailed to stockholders on or about May 28, 1999. The Company's principal
executive office is located at 1151-A Seven Locks Road, Potomac, Maryland.
Any person signing and returning the enclosed proxy may revoke it at any
time before it is voted by giving written notice of the revocation to the
Company or by voting in person at the meeting.
The cost of soliciting proxies, including the cost of preparing, assembling
and mailing this proxy material to stockholders, will be borne by the Company.
Solicitation initially will be made by mail. Further solicitation may be made
by telephone, telegram or in person by officers and employees of the Company
who would be reimbursed by the Company for any costs they might incur in
making any solicitation. Brokerage houses, custodians, nominees, fiduciaries
and others acting in a representative capacity will be requested to forward
the proxy solicitation material to the beneficial owners of the Company's
stock and the Company will reimburse them for their reasonable expenses.
VOTING SECURITIES
All voting rights are vested exclusively in the holders of the Company's
common stock, having a par value of $.01 per share ("Common Stock"), and the
Company's preferred stock, having a par value of $.01 per share ("Preferred
Stock"). Three series of Preferred Stock are issued and outstanding: the
Series A Preferred Stock ("Series A Stock"), the Series B Senior Preferred
Stock ("Series B Stock") and the Series C Senior Preferred Stock ("Series C
Stock").
With regard to the election of Directors of the Company, and to any other
business that may properly come before the Annual Meeting, the holders of
Common Stock and Preferred Stock vote together as a single class. Each share
of Common Stock is entitled to one vote. Each share of Preferred Stock is
entitled to vote on an "as if converted" basis. Each share of Series A Stock
was, as of the record date, convertible into 7.20 shares of Common Stock. Each
share of Series B Stock and each share of Series C Stock were, as of the
record date, convertible into 100 shares of Common Stock.
Only stockholders of record at the close of business on April 22, 1999, are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof. On April 22, 1999, the Company had outstanding 22,060,384 shares of
Common Stock; 13,200 shares of Series A Stock, which vote as if converted to
95,040 shares of Common Stock; 11,917 shares of Series B Stock, which vote as
if converted to 1,191,700 shares of Common Stock; and 7,945 shares of Series C
Stock, which vote as if converted to 794,500 shares of Common Stock. The
presence of a majority of the shares of Common Stock and Common Stock
equivalents represented by the Preferred Stock, in person or by proxy, will
constitute a quorum for the Annual Meeting.
All shares of Common Stock and Preferred Stock will vote to elect the
Directors at the Annual Meeting. The presence of a majority of the shares, in
person or by proxy, will constitute a quorum for the election of the
Directors. All shares of Common Stock and Preferred Stock will vote on any
other business that may be considered at the Annual Meeting or any
adjournments thereof. Under Delaware law and the Company's Restated
Certificate of Incorporation, if a quorum is present at the Annual Meeting,
each nominee for Director who receives the greatest number of votes cast for
the election of each Director at the Annual Meeting by the
<PAGE>
shares present in person or by proxy and entitled to vote shall be elected a
Director and, except as described below, any other matters submitted to a vote
of the stockholders must be approved by the affirmative vote of the majority
of the shares present in person or by proxy and entitled to vote on the
subject matter. With regard to the election of Directors, an abstention will
not be counted either in favor of or against the election of the nominee.
Abstention from voting will have the practical effect of voting against any
other matter voted upon at the Annual Meeting since it is one less vote for
approval. Broker nonvotes will have no impact on any matter voted upon at the
Annual Meeting since they are not considered "shares present" for voting
purposes.
Unless otherwise indicated, reference to "voting" stock throughout this
Proxy Statement assumes the full conversion of the relevant series of
Preferred Stock to Common Stock and reference to "shares" includes both shares
of outstanding Common Stock and shares of Common Stock into which the relevant
series of Preferred Stock is or are convertible.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the beneficial ownership, on April 22, 1999, of
(i) each person known by the Company to be the beneficial owner of more than
five percent of any class of the Company's stock, (ii) each Director, (iii)
the Named Executive Officers as defined under "Executive Compensation" below
and (iv) all of the Company's Directors and executive officers as a group.
Because each series of Preferred Stock is convertible into Common Stock (see
"Voting Securities" above), each beneficial owner of Preferred Stock is deemed
by the Securities and Exchange Commission (the "SEC") to be the beneficial
owner of the number of shares of Common Stock into which such Preferred Stock
is convertible. Therefore, in indicating the number of shares of Common Stock
and the percentage of the class of Common Stock beneficially owned by each
person, the table's figures assume that such person has converted into Common
Stock all shares of Preferred Stock of which such person is the beneficial
owner. For this reason, the table contains substantial duplication in the
number of shares and percentages of Common Stock.
Percent of Voting Power
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Beneficial of
Name of Beneficial Owner Title of Class Ownership (1) Class (2)
------------------------ -------------- ------------- ---------
<S> <C> <C> <C>
Principal Stockholders
General Electric Company............. Common Stock 2,610,539(3) 10.9%
3135 Easton Turnpike Series B Stock 11,917 100.0%
Fairfield, CT 06431 Series C Stock 7,945 100.0%
Intrafed, Inc........................ Common Stock 1,785,000 8.1%
11920 Ledgerock Court
Potomac, MD 20954
Directors
Alan O. Maxwell...................... Common Stock 1,083,210(4) 4.9%
Carl E. Ravin........................ Common Stock 55,000(5) *
Herbert F. Schantz................... Common Stock 80,000(6) *
Named Executive Officers
Robert C. Compton**.................. Common Stock 465,959(7) 2.1%
Carol L. Curran...................... Common Stock 22,231(8) *
Curtis D. Abel....................... Common Stock 40,000(5) *
Brenda A. Potosnak................... Common Stock 35,000(5) *
Philip A. Cannon..................... Common Stock 137,500(5) *
All executive officers and Directors
as a group (8 persons).............. 1,918,900 (9) 8.4%
</TABLE>
2
<PAGE>
- --------
* Less than one percent.
** Also serves as a Director.
(1) A person is considered to "beneficially own" any shares over which such
person directly or indirectly exercises sole or shared voting or
investment power or of which such person has the right to acquire
beneficial ownership within sixty days (for example, through the
conversion of securities or exercise of stock options or warrants). Unless
otherwise indicated, voting and investment power relating to the above
shares is exercised solely by the beneficial owner or shared by such owner
and such owner's spouse or children.
(2) Any securities not outstanding that are subject to options or warrants
shall be deemed to be outstanding for the purpose of computing the
percentage of outstanding securities of the class owned by such person,
but shall not be deemed to be outstanding for the purpose of computing the
percentage of the class owned by any other person.
(3) Includes 1,191,700 shares of Common Stock issuable upon the conversion of
Series B Stock and 794,500 shares of Common Stock issuable upon the
conversion of Series C Stock.
(4) Includes 75,000 shares of Common Stock subject to options that are either
currently exercisable or exercisable within sixty days of April 22, 1999.
(5) Represents shares of Common Stock subject to options that are either
currently exercisable or exercisable within sixty days of April 22, 1999.
(6) Includes 60,000 shares of Common Stock subject to options that are either
currently exercisable or exercisable within sixty days of April 22, 1999.
(7) Includes 350,000 shares of Common Stock subject to options that are either
currently exercisable or exercisable within sixty days of April 22, 1999.
(8) Includes 16,000 shares of Common Stock subject to options that are either
currently exercisable or exercisable within sixty days of April 22, 1999.
(9) Includes 768,500 shares of Common Stock subject to options that are either
currently exercisable or exercisable within sixty days of April 22, 1999.
3
<PAGE>
ELECTION OF DIRECTORS
There are five positions on the Company's Board of Directors. One of these
positions is and will remain vacant until such time as the Board of Directors
acts to fill it.
Nominee for Election to the Board of Directors
The term of Mr. Schantz expires on the date of the 1999 Annual Meeting. The
terms of Dr. Ravin and Mr. Compton expire on the date of the 2000 Annual
Meeting. The term of Mr. Maxwell expires on the date of the 2001 Annual
Meeting. The Board has nominated Mr. Schantz for re-election to the Board for
a term of three years, or until the election and qualification of a successor
or death, resignation or removal from office. Thus, the holders of Common
Stock and Preferred Stock will vote to fill one Board position at the Annual
Meeting. The persons named on the enclosed proxy intend to vote for the re-
election of Mr. Schantz to the Board of Directors. In the event that Mr.
Schantz becomes unable to stand for re-election as Director, the proxy will be
voted in accordance with the best judgment of the persons acting under the
proxy.
Information Regarding Directors of the Company
ROBERT C. COMPTON, age 51, has served as a Director since July 1988 and was
elected Chairman of the Board in March 1990. He has served as Chief Executive
Officer since October 1989 and as President since June 1988. His previous
positions with the Company include Executive Vice President and Vice
President-- Finance, Administration and Corporate Development. Prior to
joining the Company in 1985, he served for seventeen years in various
management, financial and corporate auditing positions at the General Electric
Company ("GE").
ALAN O. MAXWELL, age 69, has served as a Director since 1981. He has served
as Managing Director of Maxwell Management, a capital and management company,
since 1989. He was Chairman and President of Sunny Service Stations, Inc., a
chain of retail and wholesale fuel distribution centers and convenience food
stores, from 1984 until 1988. He is a director of Excel Sports Science and
Lynay Healthcare, Inc.
CARL E. RAVIN, age 56, has served as a Director since February 1994. Dr.
Ravin is the Chairman of the Department of Radiology at Duke University
Medical Center and Professor of Radiology at Duke University, where he has
been associated since 1978. He is a nationally known expert in thoracic
radiology, currently serves on the editorial board of the "Journal of Thoracic
Imaging," and is a Fellow of the American College of Chest Physicians and the
American College of Radiology. Dr. Ravin has served for a number of years on
the General Electric Medical Advisory Board.
HERBERT F. SCHANTZ, age 68, has served as a Director since August 1997. He
has been President of H.L.S. Associates International, a consulting firm
focused on the application of imaging and information technologies to automate
business work processes, since 1987. Mr. Schantz is a director of TAWPI, The
Association for Work Process Improvement and President of the Washington
Chapter of TAWPI. Mr. Schantz is a member of the National Conference Planning
Group of AIIM, the Association of Image and Information Management and has
served on the executive committee of the AIIM-National Capital Chapter. He has
published numerous reports and papers on information technologies, document
markets and work process automation in journals and magazines worldwide. He
has also authored several books on information technologies and document
processing automation.
Committees of the Board of Directors
During the year ended December 31, 1998, there were four meetings of the
Board of Directors. Each director attended at least 75% of the meetings. The
Audit Committee did not meet during the year ended December 31, 1998. The
Compensation Committee of the Board met once during the year ended December
31, 1998. The Board of Directors does not have a Nominating Committee.
4
<PAGE>
The Audit Committee, currently consisting of Messrs. Maxwell and Schantz and
Dr. Ravin, is primarily responsible for approving the services performed by
the Company's independent public accountants and for reviewing and evaluating
the Company's accounting principles and reporting practices and its system of
internal accounting controls. The Compensation Committee, currently consisting
of Messrs. Maxwell and Schantz and Dr. Ravin, principally reviews and approves
the salaries, bonuses and stock options of executive officers of the Company.
Compensation of Directors and Other Transactions
Directors' fees may be paid in cash or Common Stock, or a combination
thereof, at the discretion of each Director. Fees are not paid to the Chairman
or to Directors who are employees of the Company or under consulting
agreements with the Company. The Company's policy is to pay to each eligible
Director $8,000 annually plus $1,000 for each regular meeting and $500 for
each conference telephone meeting of the Board of Directors attended and to
reimburse each eligible Director for any expenses incurred as a result of such
meetings attended. No additional fees are paid for committee participation.
Mr. Schantz is under a consulting agreement with the Company. During the year
ended December 31, 1998, the Company paid Mr. Schantz $14,000 and was indebted
to him for $96,000 for consulting services.
The Company believes that it is important for directors to have a personal
interest in the success of the Company and for their interests to be aligned
with those of the Company's stockholders. Therefore, in addition to the cash
compensation described above, each nonemployee Director, under the 1989 Stock
Option Plan for Nonemployee Directors (the "1989 Plan"), annually receives
options to purchase 10,000 shares of Common Stock, subject to the limitations
that a nonemployee Director may not receive options or rights to purchase in
the aggregate more than 100,000 shares pursuant to the 1989 Plan or any other
plan of, or agreement with, the Company and that no more than an aggregate of
700,000 shares may be granted under the 1989 Plan. Mr. Schantz is ineligible
to receive options under the 1989 Plan as he has received options and
compensation pursuant to other plans of the Company. Options have an exercise
price equal to the fair market value of the shares covered by the option at
the time of the grant and are exercisable immediately.
In September 1998, the Company entered into a subordinated note agreement
with Mr. Maxwell. The note is secured by certain assets of the Company and
totaled $125,000 at December 31, 1998. The note, originally due in February
1999, was extended until August 1999. The note bears interest at 12% through
February 1999 and 10% thereafter. Mr. Maxwell has the option to convert the
note into shares of the Company's common stock, at a 30% discount on the
conversion date, if the note is not repaid on the maturity date.
5
<PAGE>
EXECUTIVE COMPENSATION
Report of the Compensation Committee of the Board of Directors
The Compensation Committee of the Board of Directors (the "Committee")
establishes and oversees the general compensation policies of the Company,
including the review and approval of compensation levels and cash incentive
initiatives for the executive officers, and administers the Company's employee
compensation plans. The Committee encourages executive officers to take equity
positions in the Company's stock. The Committee is composed of three
nonemployee Directors.
Executive officers are generally compensated through a combination of base
salary, year-end performance bonuses and stock options. The officers, as well
as substantially all full-time employees, are eligible to participate in the
Company's 401(k) Plan. The Company provides compensation that helps attract,
retain and motivate the skilled people it requires. The Committee reviews
annually with the full Board of Directors compensation for all of the
Company's officers, along with annual performance reviews evaluating the
criteria listed below.
In determining base salary and salary increases, the Committee considers
such variables as the officer's attainment of individual and corporate
performance criteria, especially increased revenue and profitability, as well
as the officer's expertise, responsibilities, and contributions to corporate
teamwork and efficiency. The Committee also considers the salary of officers
with comparable responsibilities and performance criteria of other companies
with which the Company competes for executive officers. There was no change to
the Chief Executive Officer's or other executive officers' base pay in the
year ending December 31, 1998.
The Committee believes that year-end bonuses for the Chief Executive Officer
and the other top executive officers must be tied to the achievement of
profitability objectives, business growth and the Company's overall
performance, both current and long-term. All bonus awards are the sole
responsibility of the Committee and are based on the philosophy that incentive
compensation should be directly and materially linked to the operating results
of the Company. Because of the Company's lack of profitability, no bonuses
were paid to the Chief Executive Officer or other executive officers for the
year ended December 31, 1998.
The long-term component of the compensation for the Chief Executive Officer
and other executive officers has been the award of stock options, which aligns
the interests of the executive officers with those of the stockholders. An
award of stock options has historically been granted to the executive officers
when hired and in connection with a significant change in responsibilities.
When making stock option grants for executive officers, the Committee
considers the responsibility level of the executive officer and the Company's
performance, especially increasing revenue and profitability. The stock
options generally become exercisable over a five-year period, and have
exercise prices equal to the fair market value of the Company's Common Stock
on the date of grant. Except in connection with employment, the Committee did
not grant options to the Chief Executive Officer or other executive officers
during the year ended December 31, 1998.
Due to the changing nature of the Company's business, the Committee is
evaluating compensation and alternative long-term compensation incentives.
Alan O. Maxwell
Carl E. Ravin
Herbert F. Schantz
6
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG STAR TECHNOLOGIES, INC. COMMON STOCK,
THE NASDAQ STOCK MARKET-US INDEX
AND THE NASDAQ COMPUTER AND DATA PROCESSING SERVICES INDEX
<TABLE>
<CAPTION>
__________ FISCAL YEAR ENDING __________
<S> <C> <C> <C> <C> <C> <C>
COMPANY/INDEX/MARKET 1993 1994 1995 1996 1997 1998
Star Technologies Inc. 100.00 23.34 26.66 30.01 86.66 20.00
NASDAQ Computer & Data Processing 100.00 121.44 184.92 228.24 280.39 501.76
NASDAQ Market Index-U.S. Companies 100.00 97.75 138.26 170.01 208.58 293.21
</TABLE>
The Board of Directors and the Committee recognize that although the market
price of stock is influenced by many factors, a key factor is company
performance. The stock price performance shown on the graph is not necessarily
indicative of future price performance.
7
<PAGE>
Summary Compensation Table
Shown below is information concerning the annual and long-term compensation
for services in all capacities to the Company for the fiscal year ended
December 31, 1998, the nine months ended December 31, 1997 and the fiscal year
ended March 31, 1997 of the Chief Executive Officer and the other executive
officers (collectively, the "Named Executive Officers"), whose annual salary
and bonus exceeded $100,000.
<TABLE>
<CAPTION>
Annual
Period Compensation
Name and Principal Position Ended Salary Bonus
--------------------------- -------- ------------ --------
<S> <C> <C> <C>
Robert C. Compton........................... 12/31/98 $160,000 --
Chairman of the Board, President 12/31/97 $127,000(1) --
and Chief Executive Officer 3/31/97 $160,000 $100,000(2)
Carol L. Curran............................. 12/31/98 $157,000 --
Executive Vice President, 12/31/97 $ 33,000(3) --
President, Curran Data Technologies, Inc.
Curtis D. Abel.............................. 12/31/98 $ 92,000(4) --
Vice President,
President, PowerScan, Inc.
Brenda A. Potosnak.......................... 12/31/98 $100,000 --
Vice President of Finance & Administration, 12/31/97 $ 75,000(5) --
Secretary, Treasurer, & Chief Financial
Officer 3/31/97 $ 94,000 --
Philip A. Cannon............................ 12/31/98 $111,000 --
Vice President of Technology 12/31/97 $ 81,000(6) --
3/31/97 $108,000 $ 25,000(2)
</TABLE>
- --------
(1) For the twelve months ended December 31, 1997, Mr. Compton's annual salary
and bonus was $160,000.
(2) Represents bonus for successful resolution of key corporate issues.
(3) Ms. Curran joined the Company in October 1997.
(4) Mr. Abel joined the Company in April 1998.
(5) For the twelve months ended December 31, 1997, Ms. Potosnak's annual
salary and bonus was $100,000.
(6) For the twelve months ended December 31, 1997, Mr. Cannon's annual salary
and bonus was $108,000.
8
<PAGE>
Option Grants in the Last Fiscal Year
Shown below is information concerning grants to the Named Executive Officers
of stock options pursuant to the Company's 1994 Plan made during the fiscal
year ended December 31, 1998.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------
Potential
Realizable Value
Percent at Assumed
Number of of Total Annual Rates of
Securities Options Stock Price
Underlying Granted to Appreciation For
Options Employees Exercise Option Term(1)
Granted In Fiscal Price Expiration ----------------
Name (#)(1) Year Per Share Date 5% 10%
---- ---------- ---------- --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Carol L. Curran.... 80,000 30.5 $1.25 1/28/08 $63,000 $159,000
Curtis D. Abel..... 100,000 38.2 $0.56 5/21/08 $35,000 $ 89,000
</TABLE>
- --------
(1) The dollar amounts under these columns are the result of calculations at
the 5% and 10% assumed appreciation rates set by the Securities and
Exchange Commission and therefore are not intended to forecast possible
future appreciation, if any, of the Common Stock price.
Aggregated Option Exercises in the Year Ended December 31, 1998 and Year-End
Option Values
Shown below is information with respect to the aggregate year-end value of
unexercised options to purchase the Company's Common Stock under the 1994
Plan.
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Value Realized December 31, 1998 (#) December 31, 1998 ($)(2)
Shares Acquired As of ------------------------- -------------------------
Name on Exercise (#) Exercise Date ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Compton....... 100,000 $75,000(1) 350,000 0 $ 0 $ 0
Carol L. Curran......... -- -- -- 80,000 $ 0 $ 0
Curtis D. Abel.......... -- -- 20,000 80,000 $ 0 $ 0
Brenda A. Potosnak...... -- -- 42,500 40,000 $ 0 $ 0
Philip A. Cannon........ -- -- 137,500 0 $ 0 $ 0
</TABLE>
- --------
(1) Calculated based on the difference between the option exercise price
($0.41 per share) and fair market value on the date of exercise ($1.16 per
share).
(2) The fair market value of the Company's Common Stock was $0.19 per share on
December 31, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, Directors and beneficial owners of more than ten percent of the
Company's Common Stock to file reports of their ownership of the Company's
stock and of changes in such ownership with the SEC and the National
Association of Securities Dealers, Inc. SEC regulations require those persons
to furnish the Company with copies of all Section 16(a) forms they file.
Based on its review of the copies of such forms received by it, or written
representations from certain reporting persons that no such forms were
required for those persons, the Company believes that, during the year ended
December 31, 1998, each person subject to Section 16 of the Exchange Act
complied with all applicable filing requirements.
9
<PAGE>
MARKET VALUE OF COMMON STOCK
On April 22, 1999, the closing price of the Common Stock of the Company
reported on the OTC Bulletin Board was $0.28.
AUDITORS
The Board of Directors has selected the firm of KPMG LLP ("KPMG"),
independent certified public accountants, to serve as auditors of the Company
for the current calendar year. Representatives of KPMG will be present at the
Annual Meeting, will have an opportunity to make a statement if they so desire
and will be available to respond to questions.
STOCKHOLDER PROPOSALS
Any stockholder desiring to have an appropriate proposal presented for
action at next year's Annual Meeting of Stockholders, and who wishes to have
it shown in the Proxy Statement and form of proxy for the meeting, must notify
the Company and submit the proposal in writing for receipt at the Company's
principal executive office not later than January 29, 2000. See SEC Rule 14a-8
for additional applicable requirements and procedures.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders and Annual Report on
Form 10-K for the year ended December 31, 1998, as filed with the SEC, are
being mailed with this Proxy Statement to each stockholder of record as of
April 22, 1999. Additional copies may be obtained from the Secretary of the
Company at the Company's principal executive office located at 1151-A Seven
Locks Road, Potomac, Maryland.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters that will be
presented at this year's Annual Meeting of Stockholders. If any other matter
arises at the Annual Meeting, it is intended that the shares represented by
proxies in the accompanying form will be voted in accordance with the best
judgment of the persons acting under the proxies.
By Order of the Board of Directors
Brenda A. Potosnak
Secretary
April 29, 1999
10
